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Following the approval of the shareholders of Canopy Growth and Acreage, as well as the Supreme Court of British Columbia, according to the terms of the arrangement agreement (the "Agreement"), Area holders (as defined below) will receive an immediate total total payment of 300 million USD or approximately $ 2.55 per subordinate voting share (the "Cash bonus") based on the outstanding outstanding Subordinate Voting Shares and the conversion of certain Convertible Securities described below. In addition, upon the exercise of the right, the holders of Subordinate Voting Shares of Acreage (the "Number of Subordinate Voting Shares") will receive 0.5818 of one common share of Canopy Growth (the"Canopy Shares") for each Subordinate Voting Share held by Acreage (the"Ratio of exchangethe exercise of the right, the total consideration payable under the transaction is estimated at approximately $ 3$ 4.4 billion on a fully diluted basis, represents a premium of 41.7% over the 30-day volume weighted average price of the Acreage Subordinate Voting Shares on the Canadian Securities Exchange ("CST") finishing April 16, 2019 (based on the exchange ratio, the initial receipt premium and the 30-day volume weighted average trading price of April 16, 2019).
The companies will also enter into a licensing agreement granting Acreage access to the award-winning line of brands such as Tweed and Tokyo Smoke, as well as other intellectual property rights. Once this right has been exercised, Acreage will become an integral part of a leading cannabis company with access to markets beyond the United States. Until then, the two companies will continue their activities independently.
"We are today announcing a complex transaction with a simple objective: our right to acquire Acreage secures our strategy United States as soon as a path allowed by the federal government exists, "said Bruce Linton, President and Co-CEO, Canopy Growth. "By associating Acreage's management team, licenses and assets with Canopy Growth's intellectual property and brands, the shareholders of both companies will benefit from significant value creation."
"From the very first day of our company's creation, providing exceptional customer service and value for the shareholders was our top priority, and this transaction will help achieve both goals," said President, President and Chief Executive Officer. Chief Executive Officer of Acreage Holdings. Kevin Murphy. "When the right is exercised, access to Canopy Growth's deep resources will enable us to innovate, develop and distribute quality cannabis brands across the United States and continue to expand our footprint." on the US At the same time, the convergence of many factors makes the task much more difficult – our board of directors, our management team and I are excited to provide significantly increased liquidity for our shareholders and to place ourselves in an even stronger position to provide a continuous and significant increase. "
Once the right is exercised, infrastructure, intellectual property, brands and organizational resources combined should create a global cannabis center, with a leading position in all international markets targeted for the legal sale of cannabis, including United States, Canadaand select markets across Latin America, Europe and Asia Pacific.
Additional information:
- Canopy Growth has gained national visibility in United States when she listed her common shares on the New York Stock Exchange, becoming the first cannabis company to do so. In the United States, Canopy Growth hemp operations are being implemented in conjunction with the Acreage entry strategy and will include hemp growing, processing, processing and packaging products for sale in the United States. all of Canada. United Stateswhere permitted by regulation.
- Acreage is a major multi-state operator in American cannabis. It owns or has managed existing service agreements for cannabis licenses in 20 states (which gives it the right to expand), including 87 dispensaries and 22 cultivation and processing sites. Its board of directors includes the former Canadian Prime Minister Brian Mulroney and former Speaker of the United States House of Representatives, John Boehner.
- After exercising this right, the combined activities of Acreage and Canopy Growth would immediately create the undisputed leader in US cannabis, the only relevant market on which Canopy Growth does not yet have a significant presence.
- Under the Arrangement, Acreage may issue up to 58,000,000 Subordinate Voting Shares (implicit USD 1.4 billion based on Canopy's closing exchange rate), and 5,221,905 Subordinate Voting Shares of additional acreage for certain potential acquisitions which, if exercised, will become future shares of the Company. Canopy, which, combined with increased liquidity expectations, should: Further accelerate Acreage's ability to fund a rapid organic and accretive expansion.
- Canopy Growth and Constellation Brands, Inc. ("Constellation Brands") – Canopy Growth's largest shareholder and leader in Fortune 500 beverage alcohol – will, under the terms of the arrangement, extend the terms and conditions of certain warrants and restructure other rights. See Constellation's press release April 18, 2019 "Constellation Brands enters into agreement with Canopy Growth Corporation to amend warrants and other rights".
- President of the area, George Allen will actually leave the company immediately. Acreage President and CEO Kevin Murphy assume the duties of President.
More details
The transaction will be effected by way of a court-approved plan of arrangement pursuant to the Business Corporations Act (British Columbia) (the "Arrangement") and will require the approval of the shareholders of Canopy Growth and Acreage at the special meetings scheduled to June 2019. In addition to shareholder approval, the transaction is subject to applicable regulatory, legal and stock exchange approvals as well as certain other closing conditions.
In accordance with the terms of the transaction, the Acreage Subordinate Voting Shares, which may be holders of the sharesNumber of shares with proportional voting rights"), the holders of several voting shares of Acreage (the"Number of shares with multiple voting rights") and the unitholders (the"Area Unit Holders") in High Street Capital Partners, LLC and the shares of Acreage Holdings WC, Inc. (the" USCo2 holders "), when converted or exchanged, as the case may be, are subject to the right and are entitled to the immediate refund premium.
Under the terms of the agreement, Canopy Growth will pay the initial cash premium to holders of "Acreage" subordinate voting shares, "Acreage" pro rata voting shares and multiple voting To "Acreage" unit holders and holders of USCo2 (the "Area holdersA cash bonus will be paid to the holders of the acreage based on the outstanding securities of the area currently in circulation.
Following the federal legalization of cannabis in United States (the "Trigger event") and certain other terms at closing, each pro rata share and each multiple voting share corresponding to a converted area will be automatically converted into subordinate voting shares in accordance with their terms and, thereafter, each share subordinate voting right will automatically be exchanged for shares At the close of the transaction, the holders of the acquisition units will be entitled to convert their units and the holders of USco2 will have the right to convert their shares into canopy shares. , based on exchange ratio Canopy Shares three years after closing If the trigger event is not satisfied or canceled within 90 months of payment of the cash bonus initially, the contract ends.
After taking into account the transaction, assuming that all Acreage shares are converted following a trigger event, the agreement holders will hold approximately 12.1% of Canopy Growth's interest (on a pro-active basis). forma) and up to 16.6% if the authorized acquisitions are completed before the closing date. Trigger event. Under the transaction, Acreage is authorized to issue up to 58,000,000 additional subordinate voting shares (or an equivalent number of convertible securities), as well as an additional 5,221,905 Subordinate Voting Shares ( or an equivalent number of convertible securities) of certain potential acquisitions by Acreage.
Constellation Mark Amendments
The completion of the transaction is conditional upon the approval by the holders of the Canopy Shares of the issuance of the Canopy Shares pursuant to the Transaction and certain amendments to the existing Warrants held by a subsidiary of Constellation Brands. Due to the scope of the proposed transaction, Canopy Growth and Constellation Brands changed the investor rights agreement as follows:
- The extension of the expiry date of certain warrants held by Constellation Brands: In addition to the 18.9 million warrants associated with the November 2017 Canopy currently holds 139.7 million warrants in Canopy, which, with shareholder approval, could be exercised over a period of five to eight years from November 1, 2018, compared to the previous three-year period. This includes 88.5 million A tranche warrants, which can be exercised at a price per share of C $ 50.40 and 51.2 million Series B warrants, of which 38.4 million or 75% warrants are exercisable at a price per share of CAD $ 76.68. The remaining 25% of the original Tranche B Warrants will become Series C Warrants and will be exercisable at Canopy's five-day volume weighted average price of the Common Shares on the Toronto Stock Exchange ( "VWAP") immediately before exercise. If Canopy exercises its right to acquire the Acreage and Constellation Shares if they exercise all of their outstanding Canopy Warrants, Constellation's interest in Canopy should not exceed 50%.
- If Constellation exercises all of the A tranche warrants, Canopy has committed to repurchase the lesser of 25% of its issued shares in Acreage or a dollar amount equal to 25% of the implied value of Acreage within 24 months following the exercise date of the Constellation Warrants. .
- Prior to exercising or terminating the Warrants, Constellation would be permitted to purchase up to 20 million Canopy Shares in the open market, provided that for each share purchased by Constellation, the number of Warrants in the Unit B be reduced by one.
- Constellation will continue to maintain its current level of representation on the Canopy Board of Directors.
With these changes, Constellation continues to use cash flow to generate a return for its shareholders, while Canopy Growth continues to deploy the US dollar. $ 4 billion investment made by Constellation in November 2018.
Council recommendation area
The board of directors of Acreage (the "Surface Council"), on the unanimous recommendation of a special committee composed of independent directors of Acreage (the" Acreage Special Committee "), unanimously approved the transaction and recommends to the shareholders of Acreage vote in favor of the resolution approving the transaction.
The area board and the special committee obtained an opinion on the fairness of Canaccord Genuity Corp. and INFOR Financial Inc. as of the date of the respective opinions and subject to the assumptions, limitations and qualifications on which such opinions are based. As a result, the consideration to be received by the acreage holders in accordance with the transaction is fair, from a financial point of view, to the acreage holders.
Shareholder approval
The transaction requires the approval of at least 66% of the holders of the Subordinate Voting Shares, the proportional voting shares and the multiple voting shares of that square footage. In addition, in accordance with Multilateral Standard 61-101 – Protection of minority security holders during special operationsthe transaction requires the approval of at least a majority of the unitholders of the Subordinate Voting Shares, the Proportionate Voting Shares and the Multiple Voting Shares, each voting right being distinct, as a class.
Certain directors and officers of Acreage have entered into voting and support agreements pursuant to which they have agreed to vote in favor of the transaction. The directors and officers of Acreage have also agreed to certain lock-up conditions with respect to their current holdings of Acreage securities.
Canopy Recommendation
Greenhill & Co. Canada Ltd. ("Greenhill") acted as financial advisor to Canopy Growth and provided the Board of Directors of Canopy Growth (the "Canopy Board") with an independent opinion on the fairness that the exchange ratio payable in Under the transaction is: fair, from a financial point of view, at Canopy Growth. Upon receipt of the notice of fairness from Green Hillthe transaction and the amendments were unanimously approved by Canopy's Board of Directors, with the exception of directors who abstained from voting on the transactions as a result of the amendments. All board members support the transaction and the changes.
Canopy Shareholder Approval
The issuance of the Canopy Shares in connection with the Transaction and certain amendments will require the approval of a simple majority of the Canopy Growth Disinterested Shareholders present at the "Canopy Meeting").
Additional transaction conditions
The transaction is subject, among other things, to the approval of the CSE, the Toronto Stock Exchange and the New York Stock Exchange of the Supreme Court of Canada. British Columbia and certain other regulatory approvals and closing conditions. The agreement contains declarations, guarantees and undertakings, including a termination indemnity in the amount of 150 million USD payable per area in the event of termination of the transaction in certain circumstances. The agreement also includes certain non-solicitation clauses, subject to Acreage's right to accept a superior proposal in certain circumstances, with Canopy Growth having a five-day right to match any superior proposal received. by Acreage.
Further details of the transaction and amendments will be provided to the shareholders of Canopy Growth and Acreage in information circulars that will be mailed to shareholders.
advisors
Cassels Brock & Blackwell LLP and Paul Hastings LLP acted as legal advisors to Canopy Growth. PricewaterhouseCoopers LLP (Canada) acted as financial advisor to Canopy Growth. Ernst & Young LLP (EY) acted as tax advisor to Canopy Growth. DLA Piper (Canada) LLP and Cozen O & # 39; Connor acted as legal counsel for Acreage. Canaccord Genuity Corp. acted as financial advisor to Acreage and INFOR Financial Inc. as a financial advisor to the Acreage Special Committee. Canaccord Genuity Corp. and INFOR Financial Inc. submitted an equity certificate to the Surface Board and the Surface Ad Hoc Committee, respectively. Stikeman Elliott LLP acted as legal advisor to the special committee on acreage.
About canopy growth
Canopy Growth is a diversified and leading cannabis and hemp company in the world, offering distinct brands and varieties of cannabis preserved as dried capsules, in oil and capsule form. Canopy Growth offers medically approved vaporizers through its subsidiary Storz & Bickel GMbH & Co. KG. From product innovation and process to market execution, Canopy Growth is driven by a passion for leadership and a commitment to building a world-class cannabis company, product, site and site. country at a time. Canopy Growth is present in more than a dozen countries on five continents.
Canopy Growth is proudly dedicated to educating health practitioners, conducting in-depth clinical research, and improving the public's understanding of cannabis. Through its wholly-owned subsidiary, Canopy Health Innovations, it has dedicated millions of dollars to cutting-edge, marketable research and intellectual property development. Canopy Growth is working with the Beckley Foundation and has launched Beckley Canopy Therapeutics to research and develop clinically-validated cannabis-based medicines focused on protecting intellectual property. Canopy Growth acquired the assets of the hemp research company, ebbu, Inc. ("ebbu"). Advances in intellectual property ("IP") and R & D performed by the ebbu team directly apply to Canopy's cannabis and Canopy THC cannabis breeding program Growth and its capabilities in infused cannabis beverages. Canopy Growth, through its partially owned subsidiary, Canopy Rivers Inc., provides resources and investment to new entrants into the market and is a stable investment portfolio in the sector.
From our historic listing on the Toronto Stock Exchange and the New York Stock Exchange to our continued international expansion, the pride in advancing shareholder value through leadership is embedded in everything we do at home. Canopy Growth. Canopy Growth has partnered with industry figures such as the cannabis icon Snoop Dogg, the legends of the DNA Genetics crossover and Green House, Battelle, the world's largest nonprofit research and development organization, and the Fortune 500 alcohol leader, Constellation Brands, to name just a few. Canopy Growth operates ten licensed cannabis production sites with a production capacity of over 4.4 million square feet, including more than 500,000 square feet of GMP certified production space. For more information, visit www.canopygrowth.com.
About the area
Headquarters at New York CityAcreage is the largest US-licensed, vertically-integrated, multi-state cannabis license and license holder in terms of the number of cannabis-licensed states, according to publicly available information. Acreage holds operating licenses or management services agreements with licensees to assist in operations in 20 states (including pending acquisitions) with a population of approximately $ 180 million Americans and a total addressable market estimated at 2022 more than $ 17 billion in legal cannabis sales, according to Arcview Market Research. Acreage is dedicated to building and scaling operations to create a seamless, consumer-focused cannabis experience. The Botanist, the national brand of Acreage retail stores, debuted in 2018.
Forward-looking statement
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of Canadian securities legislation. applicable. Often, but not always, forward-looking statements and information can be identified using terms such as "plans", "expects" or "not expected", "is expected", "estimates", "has" "Intention", "anticipates" or "does not anticipate" or "does not believe", or variations of these words and expressions or indicates that certain acts, events or results "may", "may", "would", "could" or "will" be taken, occur or be achieved. Forward-looking statements or information involve known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements of Canopy Growth, Acreage or their respective subsidiaries to be materially different from results, performance or achievements. expressed or implied futures. by the forward-looking statements or information contained in this press release. These forward-looking statements include, but are not limited to, statements regarding our expectations regarding: timing and results of the transaction; the expected benefits of the transaction for the parties and their respective security holders; the impact of the transaction and the expected growth of the combined entity; and the expected time of the meeting.
The risks, uncertainties and other factors involved in the forward-looking information could result in a material difference between actual events, results, performance, prospects and opportunities and those expressed or implied by such forward-looking information, including assumptions about the time required to preparing and sending mail. meeting materials for securityholders; the ability of the parties to receive, in a timely and satisfactory manner, the necessary approvals from regulatory authorities, courts and shareholders; the ability of the parties to meet the other conditions in a timely manner; the probability that the triggering event will be satisfied or canceled by the deadline; the ability of the parties to meet, as soon as possible, the conditions of closure following satisfaction or renunciation of the triggering event; other expectations and assumptions about the transaction; and such risks contained in Canopy Growth's Annual Information Form dated June 28, 2018 and in the Acreage Annual Information Form dated February 14, 2019 and filed with the Canadian securities regulatory authorities in the respective issuer profiles of Canopy Growth and Acreage on SEDAR at www.sedar.com. Readers are cautioned that the list of factors above is not exhaustive.
With respect to the forward-looking statements and information regarding the expected benefits and completion of the transaction and the expected timing of completion of the transaction, Canopy Growth and Acreage have provided such statements and information, relying on certain assumptions that, in their opinion, are reasonable this time. Although Canopy Growth and Acreage believe that the assumptions and factors used in the preparation of the forward-looking information or forward-looking statements in this press release are reasonable, we should not place undue reliance on such information and there can be no assurance that such events will occur. . occur on time or at all. The forward-looking information and forward-looking statements included in this news release are issued as of the date of this press release and Canopy Growth and Acreage does not undertake to publicly update this forward-looking information or forward-looking information to reflect new information, subsequent events or otherwise, except as required by applicable securities laws
There can be no assurance that the transaction, including the triggering event, will occur or that it will occur under the terms and conditions contemplated in this press release. The transaction could be modified, restructured or terminated. Actual results may differ materially from those currently anticipated due to numerous factors and risks.
The transaction can not be finalized until the required shareholder, court and regulatory approvals are obtained. There can be no assurance that the transaction will be completed as proposed or at all. Investors are cautioned that, unless otherwise provided in management information circulars to be prepared in connection with the transaction, any information disclosed or received regarding the transaction may not be accurate or accurate. complete and should not be invoked.
The Canadian Securities Exchange has not reviewed, approved or disapproved the contents of this press release.
SOURCE Canopy Growth Corporation
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